Hotel mold leads to dueling lawsuits

The buyer and seller of the Wyland Waikiki Resort are alleging breach of contracts

Lawsuits surrounding the Wyland Waikiki Resort & Spa have surfaced in the wake of mold problems that led to the sudden closure of the hotel last year.

The suits have been filed by both the buyer, Chicago-based Lodging Capital Partners LLC, and seller of the property, San Diego-based eRealty Fund LLC, each blaming the other for breach of contracts.

The defects, which include water damage, have resulted in the hotel's indefinite closure.

The 404-room hotel on the corner of Kuhio and Royal Hawaiian avenues opened 36 rooms on two floors last October but was closed shortly thereafter when mold was discovered in the rooms, according to Hilton Hotels Corp., manager of the property.

The most recent lawsuit, filed in 1st Circuit Court on March 2, claims that eRealty, its principals and related companies sold the hotel for about $94 million last July with major construction defects, which were concealed from Lodging Capital, doing business as WB-LCP Kuhio Owner LLC and WB Kuhio LLC. The suit is seeking unspecified damages.

At time the sale closed, eRealty Construction LLC was in the middle of renovating the hotel, according the suit, which claims the company used unlicensed workers and failed to properly design and construct the renovations.

Another suit filed Feb. 22 in U.S. District Court by 2200 Kuhio LLC and MCK Hotel LLC -- entities formed by eRealty -- claims that Lodging Capital didn't allow the company to correct any defects, some of which were due to the owner's failure to properly operate the hotel.

eRealty claims that of the $94 million purchase price, it is owed money held back for various construction, permitting and warranty obligations.

The company said it is owed $1.25 million for renovation work completed after the sale closed. It also says it is owed another $2.061 million, which was placed in escrow to cover post-closing construction obligations, and $2.5 million held in a one-year warranty guarantee account.

In addition, the eRealty suit says it is owed $15 million of $21.8 million held back pending city approvals to begin operations, though Lodging Capital claims that eRealty didn't meet a deadline to secure the permits.

Representatives from eRealty and its attorney, John Komeiji, didn't return calls for comment.

Meanwhile, Lodging Capital claims it is entitled to all the money placed in the escrow accounts and held back to repair significant property damage.

Steven Kisielica, co-founder of Lodging Capital, said the company has completed remediation of mold-infested areas and is preparing to resume operations sometime next month. Lodging Capital declined to disclose how much revenue has been lost due to the hotel's near six-month delayed opening.